CoPS/IMPACT Working Paper Number G-184

Title: The Economic Consequences of the U.S. Border Closure in Response to a Security
Threat: A Dynamic CGE Assessment

Authors: P.B. Dixon, J.A. Giesecke, M.T. Rimmer and A. Rose

Abstract

We investigate the economic consequences of a twelve-month closure of U.S. borders in
the form of cessation of trade, tourism and immigration flows. The federal government
might contemplate such action in the face of an extreme terrorism or public health
threat. Using a computable general equilibrium model, we find that border closure would
cause substantial economic loss. However this damage is significantly reduced when
critical imports (such as energy) are either exempted from the policy, or made available
through use of domestic stockpiles (such as the Strategic Petroleum Reserve). Economic
damage is reduced further if workers accept lower real wages for the duration of the
security crisis. We argue that if border closure were ever to be contemplated as a
response to a security or public health threat, it would be prudent to keep its scope to
a minimum, to make its duration as short as possible, to allow market responses to run
their course, and to enact countervailing policies that can help minimize the economic
losses.

JEL classification: F52, C68.

Please cite the later published version in:
'The economic costs to the U.S. of closing its borders: a computable general equilibrium
analysis', Defence and Peace Economics, Vol. 22(1), February 2011, pp. 85-97.